Can you buy a foreclosed property with a VA loan?

Buying a foreclosed property is one strategy aspiring home buyers pursue to find a more affordable home. If you’re on active military duty, a veteran, or the surviving spouse of one, you may be wondering if you can buy foreclosed property with a Veterans Affairs loan.

The answer is yes, you can use a VA loan for a foreclosure purchase. We’ll explain the ins and outs of how the VA loan process works when buying a foreclosed home.

How to use a VA loan to buy a foreclosed home

You can use a VA-guaranteed loan to buy a foreclosed property, but the home must meet the VA’s minimum property requirements.

These standards ensure the property is safe, structurally sound, and move-in ready. VA rules protect both buyers and lenders from purchasing homes that require serious and expensive repairs.

What are the VA home loan’s property standards?

The VA sets minimum property requirements (MPRs) to ensure the home you’re buying is safe, structurally sound, and sanitary. These standards apply to any property financed with a VA loan, including foreclosures.

To meet VA loan requirements, the property must:

• Undergo a VA appraisal
• Be a one‑ to four‑unit residential property the veteran will occupy as a primary residence
• Be free of termites, fungus, or dry rot. A pest inspection may be required in some states.
• Have access to all-weather public or private roads
• Have attics and crawl spaces that are vented and accessible
• Contain no lead-based paint hazards. If the home was built before 1978, any peeling paint must be scraped and repainted
• Have heating, electrical, and plumbing systems in good working condition
• Have a roof without major defects

If the appraisal identifies conditions that don’t meet MPRs, the lender may require repairs or the loan may be ineligible.

Can you buy VA foreclosed homes?

When a homeowner with a VA loan defaults on their mortgage, the property goes into foreclosure. A VA mortgage is considered in default if payments are more than 61 days late. The VA is required to work with borrowers and lenders to avoid the foreclosure process. If those efforts fail, the VA takes ownership of the property. The property becomes what’s known as a real estate owned (REO) home. These repossessed homes are then put up for sale, often at competitive prices.

A common misconception is that foreclosed homes are in poor condition. This isn’t always the case. VA-foreclosed homes often receive basic repairs before hitting the market, and some may qualify for VA financing again, depending on the home’s condition and whether it meets appraisal guidelines.

If you’re considering VA-foreclosed homes, you can browse available properties through VA-owned property listings, but keep in mind that not every foreclosure listing will qualify for VA financing.

Where to find VA foreclosure homes to buy

There are resources to help you find VA-foreclosed properties both online and through professionals who work with government-owned homes.

• VA REO website: Start with the official listing site at VRMProperties.com, where the VA posts available foreclosed properties for sale. Listings often include property details, photos, and contact information for submitting offers through a VA-approved agent.
• HUD Home Store: The U.S. Department of Housing and Urban Development lists homes that were backed by FHA loans but ended up in foreclosure. Although these HUD homes aren’t VA-owned homes, you can still find affordable listings that may be eligible for VA financing.
• Real estate agents specializing in VA REOs: Some real estate agents work specifically with buyers looking for foreclosed or government-owned homes. They understand how to navigate the VA loan process and can help you assess if a property meets VA standards before you make an offer.
• Multiple listing service: Your local MLS aggregates real estate listings from several sources, including foreclosures. Not all VA-owned homes show up here, but working with a licensed agent gives you access to this data and increases your chances of finding a suitable listing.
• Government listings: Some states and counties maintain their own foreclosure databases or partner with national housing agencies. These may include properties owned by the VA, HUD, or other government entities. It’s worth checking your state housing department or local government websites for updates.

How to buy a VA foreclosed home

Here’s the step-by-step process on how to buy a VA foreclosed home.

1. Get a VA loan preapproval

VA loan preapproval shows agents and sellers that you’re likely to qualify for financing and ready to buy a home. It also gives you a clear budget so you know what you can afford. Apply for preapproval through a VA-approved lender. You’ll provide your Certificate of Eligibility (COE), income details, credit information, and proof of assets. Once you’re preapproved, you’ll receive a letter stating how much the lender is willing to loan you. Bring this letter when making offers.

2. Hire a real estate agent

VA foreclosures often come with extra steps. A real estate agent who understands VA loan guidelines and government-owned properties can save you time and potential missteps. They’ll know how to find VA REOs, navigate the appraisal process, and make a strong offer. Begin by asking your lender for agent recommendations or searching online for agents specializing in VA foreclosures. Interview a few and ask specifically about their experience with VA loans and REO transactions.

3. Submit an offer

Once you find a VA-foreclosed home that fits your budget and meets loan requirements, it’s time to make an offer on the house. These properties can draw attention from investors and other buyers, so submitting a strong offer quickly can make a big difference. Work with your agent to draft the offer and include your preapproval letter. If there’s competition, your agent may suggest strategies to help your offer stand out in a bidding war.

4. Schedule an inspection and appraisal

Once your offer is accepted, the property will need a VA home appraisal. While a home inspection isn’t required to get a VA loan, it’s recommended. These steps confirm the home’s condition and market value.

The VA assigns a licensed appraiser to determine if the property meets minimum standards. You don’t need to schedule it yourself; your lender handles the request after your offer is accepted. However, you do need to find a home inspector to take a deeper look at the property’s structure, systems, and potential safety issues.

5. Close on the home

With a satisfactory appraisal, inspection, and a green light from your lender, you’ll move to closing. This is where you’ll sign the necessary documents, pay VA loan closing costs, and officially take ownership of the property.

Your real estate agent and lender will walk you through each step. They’ll coordinate with the title company, schedule your signing appointment, and help you understand your Closing Disclosure, which outlines your final loan terms and costs. Once the paperwork is signed and funds are transferred, you’ll get the keys, and the home is yours.

Advantages of buying a foreclosed home with a VA loan

When comparing a VA loan versus a conventional mortgage, VA loans often offer lower up-front costs and fewer long-term expenses. VA loans come with benefits like no down payment, competitive VA mortgage rates, and no prepayment penalties.

To qualify, you need to be a veteran, active-duty military personnel, or the qualifying spouse of one. Your lender will look at your credit score and debt-to-income ratio. Once you’re approved and know how much house you can afford, you can use your VA mortgage to buy a property that meets the loan requirements.

Because foreclosed homes are often priced below market value, using a VA loan to purchase one can help you start building equity faster. You don’t need to save for a large down payment or worry about private mortgage insurance.

What to consider before buying a foreclosed property with a VA loan

Buying a foreclosed property with a VA loan can be a smart financial move, but it’s not the right fit for everyone. These homes often come with extra considerations that may affect your timeline, budget, and expectations.

Here’s what to think about before moving forward.

• The home may need extensive repairs or renovations. Many foreclosures are distressed properties and may have sat vacant for months. You might find plumbing defects, roof damage, or outdated systems that need to be updated.
• They are typically sold “as is.” A property sold “as is” means you’re responsible for any repairs after closing, even if the issues are major.
• You may face more paperwork and red tape. Government-owned homes, such as VA foreclosures, often require additional paperwork and take longer to close.
• You may have to make compromises. VA-foreclosed homes aren’t always in an ideal location, and the inventory can be limited. You might need to stay flexible about layout, finishes, or the neighborhood.

The bottom line: A foreclosed property can be financed with a VA loan

You can use a VA loan to buy a foreclosed property. Just know these properties often come with extra steps, such as repairs, minimum property requirements, and more paperwork. Work with a VA-savvy agent, get preapproved early, and stay flexible.

Ready to start the VA loan process? Get started today with Rocket Mortgage.